Senator: AT&T/T-Mobile merger an “unreasonable risk to the economy”

Senator Al Franken is back in the trenches, telling the FCC and Department of …

The United States Senator who fiercely opposed Comcast's acquisition of NBC Universal is back in the trenches again, this time inveighing against AT&T's proposed buyout of T-Mobile USA.

"Americans gather their information about the world, purchase products and services, work, and communicate largely through the wired and wireless information infrastructure," Senator Al Franken's (D-MN) 24-page letter to the Federal Communications Commission and Department of Justice contends.

"Allowing two companies to control which websites and applications are available to consumers and what content will stream at a faster speed would be very risky. We should not let an effective duopoly dictate the rules of the road for wireless networks, and I fear that will happen if this merger is approved."

The FCC and DoJ have been entrusted with considering the proposed $39 billion union. Franken pretty much throws the book at the idea. His letter disputes AT&T arguments that the telco needs T-Mobile's network resources to roll out 4G broadband to most of the country. And he suggests that the marriage would stifle innovation, cause job losses, raise retail prices, and undermine the prospects for effective net neutrality rules.

The merger would also cripple competition in the national wireless market, allowing AT&T and Verizon to exclude rivals, the Senator insists. "It would create an unreasonable risk to the economy to entrust too much power over such a crucial industry to a company that has a history of market domination."

Troubling steps

Franken's missive follows a series of mixed signals from his political party. About a week ago three House Democrats issued a statement calling the merger "a troubling backward step in federal public policy." They were joined a day later by Senator Herb Kohl (D-WI). But other Democrats, such as North Carolina Representative G.K. Butterfield and Gene Green of Texas, support the merger—as does the traditionally Democratic-leaning Communications Workers of America.

The latest statement also comes following the FCC's temporary suspension of its AT&T/T-Mobile merger review process. Last week the Commission announced that it had been informed by AT&T that the telco has developed "new models" to "bolster its arguments concerning the size of the efficiencies made possible by the merger as weighed against the potential anti-competitive effects."

As a consequence of that disclosure, the agency announced that it had stopped its "informal 180-day clock" on the merger review "until we have the information required to evaluate these models."

AT&T filed economic analysis comments on Monday, but Franken obviously isn't watching the clock to make his views known. His letter contends that in an environment in which AT&T and Verizon would serve 82 percent of national, post-paid wireless subscribers, Sprint's days as the third market share carrier would be numbered, even further concentrating the industry.

"I also fear it would only be a matter of months before Sprint is so marginalized that it becomes an acquisition target," following a merger, Franken warns:

Handset manufacturers and technology innovators would not be interested in developing hardware that only Sprint could use, and Sprint's customers would face significant problems when traveling because their handsets would be technically unable to roam on other networks. In addition to these disadvantages, AT&T and Verizon would be in a very strong position to use their superior resources and spectrum to push Sprint out of the business.

Jobs and prices

The letter treads more cautiously when it comes assessing the impact that the merger might have on jobs in the telecommunications sector. Franken acknowledges the CWA's arguments that AT&T's acquisition of T-Mobile could create "as many as 96,000 jobs," and give the latter telco's workers an opportunity to gain collective bargaining rights (since the larger company recognizes unions).

"I care a tremendous amount about creating and protecting American jobs, and if this merger is approved, I recognize that T-Mobile workers will finally have the benefit of union representation, which is long overdue," Franken notes. But the statement also expresses concern that the acquisition could instead result in the termination of jobs.

The merger of AT&T and T-Mobile would likely involve thousands, perhaps even tens of thousands, of layoffs. Despite having been asked directly by me and several other members of Congress to provide estimates of the number of layoffs AT&T is expecting to result from the merger, AT&T has refused to release this information. According to recent reports, AT&T employs 266,590 people and T-Mobile employs 37,795. AT&T has calculated that it will reap $3 billion per year in "operational savings" and "cost synergies" as a result of the merger. While it will not discuss what portion of these "synergies" comes from the elimination of jobs, I think it is fair to assume that layoffs constitute a substantial portion of the cost savings AT&T is promising to its investors.

And whatever gains in employment status were made would be overshadowed by what Franken sees as a major consequence of the merger, a "significant rise" in mobile subscription and retail device prices. The logic here is that T-Mobile offers "consistently lower" prices than AT&T. Thus the smaller telco functions as a competitive check, preventing AT&T's rates from "creeping ever higher."

The letter cites a think tank study suggesting that retail prices could double for both T-Mobile and AT&T customers following a merger.

"Without T-Mobile, the market would have no effective check on price increases or technological stagnation by AT&T and Verizon," Franken's section on consumer prices concludes. "Sprint places very little pressure on the prices of AT&T and Verizon, because it charges only marginally less than they do. The elimination of the lowest cost national wireless option likely explains why so many T-Mobile customers are opposed to this deal."

Matthew Lasar
Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz. Emailmatthew.lasar@arstechnica.com//Twitter@matthewlasar

97 Reader Comments

I was wrong. I know that I have disappointed many of you. If you were offended then I am sorry -- that your standards are such that even the smallest deviations from perfection would cause offense. I deeply regret any harm I have caused by my negligent actions and I want to apologize, especially to my family whom I have hurt the most. We would appreciate it if you would respect our privacy at this time. Thank you.

Sen. Franken is far and away my favorite member of either half of Congress. He's the only one who I see consistently taking up for consumers in a technically-literate way. Speaking both as an American and a frustrated T-Mobile customer, here's to hoping he can build some opposition to this merger.

I'm liking the sound of this guy (full disclosure: I, like religion, have no allegiance to any party), I like that he's sticking up for his beliefs while seemingly the rest of the political spectrum either approves or doesn't care about the topic.

You're right. I stand corrected. I'll remember to do a little research before running my mouth.

Or read the VERY FIRST LINE of the article.

Dude, I said I was sorry and I'm sharpening my ritual seppuku blade. Isn't that enough?

Yeah because you really can't fix stupid. Is it so much to ask to read the article you comment on before posting? It's bananas the number of people who don't even bother reading an article before commenting. (points to those who get the reference.)

This is about union jobs. AT&T has a lot of union jobs. Some will be cut in the synergy.

Its also about fed power to control business. If the fed had stop trying to meddle in most business practices years ago, who knows where we would be with high speed internet, utility companies that actually provide good service, etc. Instead, companies like AT&T find it more profitable to corner the market and lower service. When there is no way for start ups to compete, the trifecta is complete. All AT&T needs to do is bribe some politicians and bureaucrats to get their way now.

Franken is just trying to look tough for re-election. Nearly all politicians are tools. Franken is just a likeable tool that doesn't get the job done.

I don't know what's more rediculous, regulator's actually keeping a straight face over this or a union selling out its own members over something that will most likely hurt them in the long run. Either way, atleast they're being pretty transparent about corruption going on.

I'll be the first to admit I wasn't thrilled to hear that he got elected, and I still don't agree with the man on some issues, but I'll defend his stances vis. a vis. technology until they put me in the ground. He is a true believer in the freedom of technology, and we need more like him. Rep. Wyden of Oregon is similar, and both have caught my eye.

No, Franken is a lone voice in the wilderness here, still arguing for not having one or two companies completely dominating a particular market. Teddy Roosevelt was also a fan of trust-busting in his day, but of course these days the Tea Party idiots would call him a RINO and sideline him, because they never met a big corporate behemoth they didn't like.

In banking, telecom, whatever, we need to break these big companies up so they're not "too big to fail" and so they actually have to compete with each other for customers' money. As it stands, they've just got licenses to print money, because where else are you gonna go (especially if we're left with an AT&T/Verizon duopoly).

Franken is just trying to look tough for re-election. Nearly all politicians are tools. Franken is just a likeable tool that doesn't get the job done.

Well, Franken has been doing this all along, not sure it is just about reelection. As for being a "tool," he actually seems more informed on these things than the average congressperson.

I know. He has been a more involved tech politician. He deserves credit.By tool, I mean politician that saps taxpayer money in salary and expenditures, with no real effect toward bettering the USA.As a tool, he is seemingly the most informed tech guy in Congress. Doesn't change the fact that the other tech-stupid Congressmen won't do what is right for the US.

No, Franken is a lone voice in the wilderness here, still arguing for not having one or two companies completely dominating a particular market. Teddy Roosevelt was also a fan of trust-busting in his day, but of course these days the Tea Party idiots would call him a RINO and sideline him, because they never met a big corporate behemoth they didn't like.

In banking, telecom, whatever, we need to break these big companies up so they're not "too big to fail" and so they actually have to compete with each other for customers' money. As it stands, they've just got licenses to print money, because where else are you gonna go (especially if we're left with an AT&T/Verizon duopoly).

Sorry to break it too you, but DEMs get a boatload of cash from corporations too. Nearly all politicians are corrupt in Washington. We have wrecked the competitive system of free market for decades when the government picked winners and losers. We reap what we have sown. The solution to utility company behavior is not easy, but 1 phone company is not the answer.

I'm concerned not just at another potential strengthening of this duopoly, but also at the possibility that corporate propaganda will be spread more effecitively. Look at Rupert Murdoch's moves with Fox. Look at the damage that Fox News has done. A minority is holding us hostage.

Franken is one of the few truly principled members of the Senate. Some people think he's a joke because he used to make a living in comedy. Clue you in folks, to succeed in comedy, especially comedy writing, you need to be very, very bright. Now to recognize intelligence when you see it, you need to have at least half a brain yourself. That's why people who denigrate Franken tend to be Tea party types, like our little friend Mr. CX1 here.

You're right. I stand corrected. I'll remember to do a little research before running my mouth.

Or read the VERY FIRST LINE of the article.

Dude, I said I was sorry and I'm sharpening my ritual seppuku blade. Isn't that enough?

Yeah because you really can't fix stupid. Is it so much to ask to read the article you comment on before posting? It's bananas the number of people who don't even bother reading an article before commenting. (points to those who get the reference.)

I'll think we've all learned an important lesson here today. I'm sure you'll remember the next time you make a simple mistake when commenting on the Internet how serious it is. I know I will. I have no doubt that many here will be quick to correct you. And if they call you "moron" or "stupid", even though it hurts please know it's for your own good. Having your entire education and intelligence called into question for a simple misunderstanding is all part of that process. The people looking out for each other here are what make this such a great community.

1) The FCC already prevents wireless carriers from discriminating against web sites. Under the NN rules, wireline providers can't block anything, period, and wireless had "exceptions." Most people mistyakenly think this means wireless did not have any of NN applied, but those people did not read the rules. Wireless providers CAN limit bandwidth utilization "to protect the network" and for a few other reasons, and they can block certain types of activity by TYPE of data or load on the network, but they absolutely CANNNOT choose a specific site or service to block. Examples from the FCC stated this one in particular: They could refuse to allow video streaming entirely, but they can NOT choose one site over another, nor offer their service but not others, nor calculate bandwidth use differently depending on provider, source, or desitnation, ONLY by protocol or service type, and current bandwidth bottleneck or trouble. Further, they can not develop a price model that allows such services only at higher tiers if it is possible to use that service on a lower tier or under a smaller data cap (aka, they can't offer a fee option to enable video streaming on one plan but not on a lower plan that is still the same SPEED, and thus equally capable). What you;re asking them to block that AT&T might be capable of under a supposed duopoly (man you;re really insulting Sprint, aren't you), is ALREADY banned by law.

2) The DOJ has already commented on letting Sprint AND T mobile be acquired is right out. Sprint will not be permitted to be acquired, a tri-opoly (if there is such a thing) will be preserved.). At the same time as arguing that a duopoly would potentially give ATT and VW right to simply raise rates and screw consumers easily, on the other hand you suggest their new efficincies might leave Sprint incapable of competing? That would assume they lowered, not raised prices... If ATT raises prices, people flee to sprint and sprint wins. If ATT lowers prices, sprint either does the same, or CONSUMERS win. This also completely ignores the language in the deal that ensures T remains a seperate entity, with it's own board, own phones, own plan choices, and own marketing, and will even keep seperate finances, essentially leasing back access to it;s own network from AT&T (under pre-negotiated terms and as monitored by the SEC). This means, even though AT&T own T, leaving basically 2 companies to collude and raise prioces on the majority of people, there are 3 seperate teams of people that have to do that, and under the terms of the FCC plea from AT&T VOLUNTEERING for 5+ years of routine audits to show that isn't happening, should AT&T and T's boards collude with VZW, the DoJ fallout from that would be insane, and people (top execs) would GO TO JAIL. This merger changes who owns the network, but T will still operate independently.

T is going away ONE WAY OR THE OTHER. They will not exist next year wether AT&T buys them or not. Sprint can't, which means they go to a) VZW, or b) a foreign company taking all those tens of billions and a large portion of the jobs out of the USA forever.

Yes, a merger may cost jobs in the long run. But, most T stores will stay open, T will continue self marketing and as a brand. Support may be merged, other internal savings are to be had, and several thousand people may be effected, but those people are losing their jobs ANYWAY if T goes under, and MORE of them will lose their jobs if VZW buys them, or if they get broken up into chunks and sold off. However, in the short term? The merger of the network and more mrapid deployment of teck (using existing T towers to add ATT services where they don;t exist, instead of building new towers and fighting all those local land court cases), there could be 50-75K new jobs, easy, that will last 2-4 years. Right now, that's a REALLY good thing.

As for the "operational synergies" AT&T is refering to network operations (a larger combined network is cheaper), more towers in more places (allowing 850MHz and LTE rollouts on existing platforms without new tower construction), and T mobile's management software for consumers is light years ahead of the mess ATT made out of what Bellsouth and Cingular left them a few years ago. Faster tower rollouts means more customers and less customer service calls at the same time. Yes, total CS staff may be reduced, but only after a few years once both systems are merged and Bellsouth's crap can be dismantled.

And then there's the airspace. If T goes to AT&T, that airspace can be used and better utiulized in a year. It will have limited impact to existing custoemrs as well, as they can NOW start selling cross band phones so that when T starts turning off 1700MHz to roll out LTE, the existing channels combined with AT&T 850MHz will keep their phones running, and only a few people will need new handsets if they have ones more than 18 months old by the time that network goes dark, and those people will qualify for free new phones anyway (and AT&T has already accepted doing that rollover without contract extension for effected users). If VZW buys T, it will take not less than 3 years to roll that airspace over, and ALL t users need new handsets to move to CDMA, and will take a step backwards in performance and lose voice/data concurrewncy in the process. This is a major interuption to millions of T custers who would most likely defect to AT&T once losing T's services. AT&T can make quicker, and less disruptive use of that airspace. Further, that airsdpace solves critical FCC issues AT&T has in dense metro areas due to lack of airspace.

Seriosly, this merger is GREAT for consumers. It;s only bad for Sprint, and marginally bad for Verizon (granted their individual responses to the plan). The offer AT&T made to be voluntarily regulated at a much more granular point is also commendible, including conceeding without a fight to many other FCC policies previously contested. Prices are unlikely to go down, but they are damned near certainly NOT going up. Network qwuality will improve, and for a few years we get a massive upswing in rollout, expansion, and get LTE rolled out at near 3X the planned current pace. And all this with little or no disruption to existing T customers (ass opposed to them going bankrupt in 2 years or being bought by a competitor with an incompatible network). So Al, I love ya, but clearly, Sprint has been a large campaign contrubutor, and it shows.

This is about union jobs. AT&T has a lot of union jobs. Some will be cut in the synergy.

Its also about fed power to control business. If the fed had stop trying to meddle in most business practices years ago, who knows where we would be with high speed internet, utility companies that actually provide good service, etc. Instead, companies like AT&T find it more profitable to corner the market and lower service. When there is no way for start ups to compete, the trifecta is complete. All AT&T needs to do is bribe some politicians and bureaucrats to get their way now.

Franken is just trying to look tough for re-election. Nearly all politicians are tools. Franken is just a likeable tool that doesn't get the job done.

Wow, this article is lousy with trolls.

It has nothing to do with unions. Absolutely none. To try and paint it as such shows your ignorance.

And as for "fed power to control business", so what? There needs to be some entity that does control businesses. And no, the "free market" doesn't count, as it does not work in the least.

Its also about fed power to control business. If the fed had stop trying to meddle in most business practices years ago, who knows where we would be with high speed internet, utility companies that actually provide good service, etc. Instead, companies like AT&T find it more profitable to corner the market and lower service. When there is no way for start ups to compete, the trifecta is complete.

I find it hilarious that anyone could actually believe that de-regulation somehow leads in a direction *away* from monopolies and an inability to compete.

The only thing that stops the current forerunner from just buying up everyone else is regulation. The same for blacklists, price collusion, and a host of other unfair and anti-consumer business tactics. It's like any consumer would be against things like line sharing laws without being brainwashed by big corporate. If anything, in a market that has only 4 major competitors nationally (and often less in various locales), it's astonishing that there isn't *much* tighter scrutiny, especially for things like potential price collusion. It requires at least 8 entities having competitive market shares for there to be real competition in a market, and even then you can still end up with concerns regarding collusion.

But hey, no, let's just forget history, Bell, etc. Not to mention the entire "with what airwaves" problem you run into for startups in the face of giant companies with astronomically deep pockets by comparison. And the entire auction process is extremely capitalistic, before you complain about that being the barrier. What would be better, just letting the companies do whatever they want with public airwaves? Yes, I can see where that would go without any regulation, you'd just have them sabotaging each other and everything else, assuming there even was any competition going on.

The ultimate stage of unregulated capitalism is zero competition from a lack of viable competitors. Our entire government is founded on the principle that someone needs to protect the interests of the common person in the face of unreasonable interference from those with substantially more power, beyond our effective say. While there is a balance to be had between bureaucracy and freedom, total deregulation is a ridiculous sham promoted by those who already are in power and simply want more, at the cost of those around them. Who cares if you're "free from the government" or not, once you're basically owned by a corporation you have no real say in?

Laissez faire politics make me sick. It's a cheap bit of chicanery to trick people into effectively disenfranchising themselves through the lure of pretending they could get more, if only they weren't being stopped by the government, while ignoring the elephant in the room that's already all too happy to continue stomping.

Capitalism absolutely falls apart as a competitive system without regulation to make sure everyone is playing by the same set of rules.

Sen. Franken is far and away my favorite member of either half of Congress. He's the only one who I see consistently taking up for consumers in a technically-literate way. Speaking both as an American and a frustrated T-Mobile customer, here's to hoping he can build some opposition to this merger.

Why is everyone surprised by a union supporting something that will result in more union dues being paid? Of course they're supportive of it! To be fair, my now-ex-wife works at AT&T and the union there isn't all that bad. It's actually a pretty good job, overall, compared to non-union positions.

I still oppose this merger; competition is lacking enough as it is. Prices need to DROP, in my opinion, not keep trending up. Mobile is the future in many ways and these corporations should not be allowed to imperil that further than they already do.

Top U.S. Federal marginal income tax rate from 1913 to 2011.Not seeing an increase there.

Oh, and this:

But now we're really off topic.

That second graph is so out-of-date it is not even funny. It does not include the trillions spent by the administration in 2010 and it does not include the trillions added on for the next 10 years set by policy this year. Using 2009 figures is EXTREMELY disingenuous.

Back on topic: even being a strongly-capitalistic Republican and a $400+/mo AT&T customer, I find myself agreeing with Franken more and more on the AT&T/T-Mo merger topic. I am slowly being convinced this merger is not good for the telecommunications market and wish T-Mobile and Sprint could become stronger in the market as well.

T-Mobile and Sprint both need compatible iPhones.

Off-topic again, since both Sprint and Verizon are CDMA, has no one been unable to jailbreak the Verizon iPhone to work on Sprint? If I could use the iPhone on Sprint, I would jump to their unlimited plan and just deal with the crappier network for now.

We have wrecked the competitive system of free market for decades when the government picked winners and losers. We reap what we have sown. The solution to utility company behavior is not easy, but 1 phone company is not the answer.

Follow this loop for me will you?

1. Corporation X makes lots of money, leading to . . .

2. Corporation X amassing lots of political power, leading to . . .

3. Corporation X influencing legislation, regulation, and policing to bend in its favor, leading to . . .

4. See #1 above. But even more money.

Don't tell us that you are going to claim with a straight face that #2 and #3 above does not happen.

This is why the natural path of any economy, if there is no government regulation, is the proliferation of monopoly. It has already happened before and the result was the Standard Oil Company.

And do not also claim with a straight face that we'll all be much better off if all markets and industries are monopolies with political power concentrated in a handful of ultra-billionaires who control these monopolies.

You conservatives with simplistic answers are the biggest threat to society. And I'm not sure that's mere hyperbole.

The only thing the DoJ should be doing concerning AT&T is breaking them up again and without the possibility of any future mergers.

Really? show me the harm they did.

- Lower priced plans and/or more minutes per plan at the same price tier than when under Cingular.- 2nd lowest priced pre-paid wireless plans in the USA- Most GB per $ on any capped phone data plan.- Added A-List to most plans free further increasing real air minutes used vs billed air minutes.- AT&T unity adding free landline calls to all AT&T customers (free). - Lower home phone prices than ever before, and unlimited home long distance.- more rapid deployment of new phone tech vs what any other phone company had previously done (3G rollout, followed by HSDPA and now HSPA+ upgrade)- Though their CS still sucks, it has improved in rating more than any other competitor in the space, and they were never last in the list. - pricing synergies for having multiple packages that actully result in savings (unlike TWC's baited programs that end up costng as much as 20% more than seperated services after the first 12 months).- More Android handset choices than VZW or Sprint, and more LTE handset choices landing in 2012 than VZW + Wimax combined, let alone the other HSPA+ options that test over 21mbps (and 42mbps coming soon, the USB dongles doing it are available now).

So long as there is competition from any ONE major competitor, under out existing laws preventing collusion, the DoJ can not rule this acquisition a monopoly threat, and thus has no power to stop it at all. The FCC is the only body that can halt this, and they're all for it given the rapid and consumer non-disruptive redeployment of T's 1700MHz to solve AT&T's NYC and SF area frequency issues 3 years ahead of the FCC's own plan to do so.

At the same time as arguing that a duopoly would potentially give ATT and VW right to simply raise rates and screw consumers easily, on the other hand you suggest their new efficincies might leave Sprint incapable of competing? That would assume they lowered, not raised prices... If ATT raises prices, people flee to sprint and sprint wins. If ATT lowers prices, sprint either does the same, or CONSUMERS win.

That would be true if the only way Verizon and AT&T could put the squeeze on Sprint was by undercutting their prices, but that isn't so. Its more likely that they would just use their market position to kill Sprint by preventing them from getting decent handsets and overcharging or refusing roaming and backhaul agreements.